The Kremlin Turns to China

A decade after the demarcation of the Sino-Russian Border, Russia is becoming increasingly dependent on China.

By Greg Shtraks for The Diplomat

October 14, 2014

Exactly a decade ago, on October 14, 2004, Vladimir Putin travelled to Beijing to sign an agreement that would cement the final demarcation of the Sino-Russia border. It was a resolution that took forty years of heated negotiations and a substantial sacrifice on the part of the Russian government, with the Kremlin agreeing to give up Tarabarov Island (Yinlong in Chinese) and half of the Bolshoi Ussuryiski Island (Heixiazi) in order to secure an agreement. Interestingly, Putin’s trip came in the immediate aftermath of the Beslan crisis as much of Russia was still reeling from the deaths of 334 hostages, including 186 children. As it would turn out, the reforms made in the wake of Beslan would have ramifications for Sino-Russian relations as great as those of the border demarcation.

The Kremlin used the Beslan crisis as an excuse to eliminate provincial gubernatorial elections and give the president the authority to appoint the governors himself. As a result, Putin was able to remove the populist governors of the provinces bordering China (Primorskii Krai, Khabarovskii Krai, and Amur Oblast), all of who used anti-Chinese rhetoric to get elected, and replace them with his own people, who would follow the new, pro-China policy emanating from the Kremlin. Since then, despite minor disputes and lingering distrust, Sino-Russian relations have warmed significantly, culminating with Russia’s “pivot” towards China over the last several months.

Today it’s easy to forget how frosty the relationship between Russia and China was in 2004. Although Russia was already the second-largest producer or oil and natural gas, while China was one of the largest consumers, there were no pipelines between the two countries. Putin was extremely reluctant to build one, citing “Russia’s own national interests” as the primary reason for his intransigence. Nor were relations any better on the cultural front, after Russia committed the cardinal sin of inviting the Dalai Lama to visit Moscow in November 2004. More importantly, many Russian intellectuals and policymakers genuinely believed that Chinese migrants to Russia would engulf the Russian Far East (RFE) and gradually redraw the border. This belief, above everything else, is what prevented a closer Sino-Russian partnership. However, as it became apparent that the fear of mass Chinese migration was unfounded, the Kremlin slowly began to pursue a pro-China policy. Still, until 2009, Moscow kept Beijing at arm’s length as it continued to stall on negotiations regarding the construction of oil and gas pipelines and refused to change the restrictive migration laws that prohibited Chinese laborers from working in the RFE.

How things have changed. In 2009, the global financial crisis finally forced Russia to sign an oil agreement with China in exchange for a loan of $25 billion to Russian oil giant Rozneft. Russia initially agreed to supply China with 300,000 barrels of oil per day, but that number was doubled in 2013 in exchange for another loan of $30 billion. Overall trade with China, which was as low at $20.3 billion in 2005, skyrocketed to $59.3 billion in 2010 and reached $89.2 billion in 2013. Trade volume is expected to surpass $200 billion by 2020. Meanwhile, Russian public approval of China had fluctuated between 50 percent and 60 percent, until reaching 77 percent in the aftermath of the $400 billion natural gas deal that was signed by the two countries in May 2014. Amazingly, 51 percent of the respondents identified China as Russia’s closest friend.

Beneath the surface the Sino-Russian relationship is actually even more vibrant. The Ministry for the Development of the Russian Far East, established in May 2012, has unabashedly pursued Chinese investment in the region. Much of this investment has come through the Sino-Russian Investment Fund, a private equity fund that was created in June 2012 specifically to facilitate investments by China into Russia. That isn’t to be confused with the China-Russia Investment Cooperation Committee, a governmental partnership led by Chinese Vice Premier Zheng Gaoli and Russian First Deputy Prime Minister Igor Shuvalov, which held its first meeting in September 2014. Under the auspices of this organization Russia hopes to receive much needed Chinese investment in the fields of energy, communications, high-speed-rail, and infrastructure development.

Speaking of infrastructure, the Sino-Russian border has become a veritable hub of construction. There are currently no bridges across the Amur River, but at least three are in the process of being built. The biggest bridge would connect China’s Heihe with Russia’s Blagoveshensk, while the smaller (but still massive) conduit would link Russia’s Nizhnelenninskoe with China’s Tongjiang. Yet another bridge is being built specifically for the transportation of iron ore from Russia to China. There are even plans for the construction of an aerial lift that would span the border! Even Ulan Bator is getting in on the action with plans for the construction of a major highway that would connect China and Russia via Mongolia.

There remain plenty of prominent naysayers, such as Pavel Baev and Gilbert Rozman, who continue to claim that the Sino-Russian relationship remains a mile wide and an inch deep. There are also rumors that Chinese bankers and investors remain highly dubious about investing in Russia. Nonetheless, every day brings news of new collaborations that show that the relationship is both broadening and deepening. On October 13, Russian Prime Minister Dmitry Medvedev met with his Chinese counterpart, Li Keqiang, in Moscow and announced a series of initiatives, including more that $4.5 billion of credit lines to Russian banks and companies. On the same day, in Beijing, the Russian Direct Investment Fund, Russia-China Investment Fund, and the local government of China’s Shaanxi Province signed an agreement to develop a series of high-technology parks in Russia and China.

As winter sets in and the Western sanctions on Russia really begin to sting, the Kremlin will have to become increasingly dependent on Chinese investment. Let’s just say that the Dalai Lama shouldn’t expect to come back to Moscow any time soon.

Greg Shtraks is a PhD student at the Jackson School of International Studies at the University of Washington.